November 20, 2017

Buoyant economy lifts SM Prime Q3 profit by 16%

NEWS
Henry Sy-led SM Prime Holdings, Inc. said on Monday its net income for the third quarter increased 16 percent to P5.66 billion as “the buoyant overall economy” had boosted rental income and mall sales. The profit growth in the third quarter led to a 15 percent rise in net income for the first nine months to P20.05 billion from the P17.45 billion recorded a year ago. Consolidated revenues in the third quarter reached P64.69 billion, up 12 percent from last year, while overall operating income expanded 16 percent to P30.14 billion. It said the growth in revenues was due to additional rental revenues from the company’s mall expansions, consistent improvement in same-mall sales and higher contribution from residential sales. “SM Prime’s performance in the third quarter is a testament to the buoyant overall economy that benefits the whole property market. The timely expansion of our malls and launches of our residential projects in the provinces are positively contributing to the strong performance of our Company,” SM Prime President Jeffrey Lim told the Philippine Stock Exchange. “Given all these, we remain optimistic that we are on track to meet our growth target this year,” he added. Mall revenues grew 10 percent to P38.58 billion and accounted for 60 percent of the consolidated revenues in the first nine months. Residential group revenues also grew by 10 percent to P20.50 billion in the first nine months and accounted for 32 percent of the consolidated revenues. “The increase in sales take-up of ready-for- occupancy (RFO) units and construction accomplishments of SM Development Corporation (SMDC) drove the revenues higher. These revenues mostly came from Shore 2 Residences in Pasay City, Air Residences in Makati City, Fame Residences in Mandaluyong City, Trees Residences in Quezon City, Grass Residences in Quezon City and S Residences in Pasay City,” SM Prime said.
(Source: The Manila Times, 07 November 2017)

RESEARCH VIEW
SM Prime partly attributed the increase in profits to its retail operations. For the remainder of the year, Colliers sees stronger retail sales as robust holiday shopping is supported by stable spending indicators such as sustained household spending due to continued inflow of overseas Filipino workers’ (OFW) remittances; contained inflation (2% to 4%) and growth of personal income (average of 5% since 2010). The proposed reduction of income tax rates and exemption of more employees from paying income taxes also bode well for the country’s retail sector. The new tax rates are expected to be enacted by the start of next year. The higher take home pay should raise households' purchasing power, resulting in the expansion of Metro Manila's consumer base.

PH seen sustaining 7% yearly economic growth momentum

NEWS
Finance Secretary Carlos G. Dominguez III expressed confidence that the Philippines can sustain its current economic growth pace over the medium term amid the Duterte administration’s infrastructure modernization program. Dominguez said the country would sustain its 7 percent Gross Domestic Product (GDP) expansion, noting the government’s P8.4-trillion “Build, Build, Build” infrastructure program will be the key driver of growth over the next few years. “The 6.5 percent growth for the first semester makes the Philippines the second fastest growing economy in Asia after China. We retain the 7 percent growth rate target for the year, spurred by the investment spending in the infrastructure program,” Dominguez said. “We believe this growth rate is sustainable well into the medium term,” he added. “Increased investments in modernizing the country’s infrastructure will be the key driver of our growth the next few years.” “These investments seek to bring up our infrastructure to match those of our most progressive neighbors. By modernizing our infrastructure, we will address congestion in our ports, airports and roads,” the finance chief said. To maintain fiscal discipline while embarking on the ambitious infrastructure buildup plan, Dominguez said the government is working on the congressional approval of a tax reform package in order to spell a steady revenue stream for its priority programs. “Investing in infrastructure has the highest multiplier effect on the economy. It creates construction jobs in the short term and manufacturing jobs in the long term. It improves land prices, assists in raising our agricultural productivity and encourages dispersal of our industries into the regions,” Dominguez said.
(Source: Manila Bulletin 10 November 2017)

The Philippine economy, as measured by real gross domestic product (GDP), grew by 6.9% in 3Q 2017, exceeding market expectations. The figure is faster than the upwardly revised 6.7% growth recorded in 2Q 2017 but slightly slower than the 7.1% posted a year ago. The Philippines remains as among the fastest growing economies in the region, only behind Vietnam’s 7.5% but faster than China’s 6.8% and Indonesia’s 5.1%. The country’s year-to-date (YTD) growth stood at 6.7%, on track to achieving the government’s goal of 6.5% to 7.5%. Colliers believes that the country’s economic growth over the near to medium term will primarily hinge on the government’s commitment to implement infrastructure projects throughout the country. The ushering in of the "golden age of infrastructure" lends support to the government's decentralization push which should unlock land values in areas outside of Metro Manila and stimulate business activities in the countryside. We are optimistic that property developers will benefit from the government’s infrastructure push.

Roadmaps for MICE, hotel sectors launched

NEWS
Roadmaps for the hotel and meetings, incentives, conventions and exhibitions (MICE) sectors have been unveiled by the government and industry associations. The Board of Investments (BoI) said the roadmaps detailed priority interventions for stakeholders and the government’s policies, among others. “We view the new roadmaps being presented … as very timely. The year 2017 was declared by the United Nations as the International Year of Sustainable Tourism Development because of the potential of the tourism sector to advance the universal 2030 Agenda for Sustainable Development,” Trade Assistant Secretary Felicitas Agoncillo-Reyes said. Director Milagros Say of the Tourism department presented the National Tourism Development Plan (NTDP), which aims to “develop a globally competitive, environmentally sustainable and socially responsible tourism industry that promotes inclusive growth…”. University of the Asia and the Pacific (UA&P) economist Peter Lee U introduced the hotel industry roadmap in behalf of the Philippine Hotels Ownership Association (PHOA) while Rhodora Tiongson provided the highlights of the MICE roadmap in behalf of the Philippine Association of Convention/Exhibition Organizers and Suppliers Inc. (PACEOS).
(Source: The Manila Times, 11 November 2017)

Colliers is optimistic that the full implementation of the hotel industry roadmap should help the government achieve its objective of attracting more foreign tourists. We see occupancy rates in the entire metropolitan hovering between 65% and 70% over the next twelve months, partly buoyed by the country’s recent hosting of the ASEAN Summit. Overall, we believe that solving safety and security issues, streamlining the business registration process, and expediting the implementation of crucial infrastructure projects should enable the current administration to meet or even surpass its visitor arrival target. The Tourism department is projecting to attract 7 million international visitors this year while Colliers is expecting a more conservative 6.6 million. Foreign arrivals for the first eight months of the year reached 4.47 million, up 10.6% YoY.